On October 1 st , 2 0 2 2 , Payne Windows modified the terms of an
Fantastic news! We've Found the answer you've been seeking!
Question:
On October st Payne Windows modified the terms of an outstanding notes payable with Fratelli Financing, Inc. The note was originally a oneyear note that was due on October st Under the terms of this debt restructuring, Fratelli Financing agreed to lower the amount of principal outstanding on the note, decrease the note's interest rate, and extended the life of the note until October st Under these restructured terms, Payne Windows will have to make quarterly interest payments to Fratelli with the first payment due on December st The repayment of the modified principal balance is due on the last day of the note's extended life, October st Specific information about the note is as follows:
Previous principal balance $
Modified principal balance
Previous interest rate
Modified interest rate
Revised remaining life of note years
Requirement One:
Determine the expected future cash outflows on this note.
Modified principal balance
Times: modifed interest rate
Annual interest payment
Times: revised life of note years
Total interest paid on note
Plus: modified principal balance
Total future cash outflows
Requirement Two:
Determine the amount of gain that the Payne will record on this debt restructuring.
Previous principal balance
Less: total future cash outflows
Gain on debt restructure
Requirement Three:
Record the October st journal entry to account for the the restructuring of Payne's outstanding debt to Fratelli Financing.
Requirement Four:
Record the December st journal entry to account for the first quarterly payment of interest to Fratelli Financing, Inc.
Related Book For
Horngrens Financial And Managerial Accounting The Financial Chapters
ISBN: 9780134486840
6th Edition
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura
Posted Date: